1) he ignores energies role in economies – we substitute $500,000 of (American) human labor with $100 barrel of oil. The story of industrialization and globalization is not one of ingenuity and productivity but rather one of substituting fossil energy for human labor. Without (cheap energy) we can’t have a growth based economy. And profits and wages go down and/or prices go up.

1a) Oil change international has shown an estimate of $750 billion in subsidies for fossil fuel companies -the villain of climate change and global warming according to Bill. Of this, $650 billion is subsidizing consumption for poor people. So there is $100 billion of subsidies in a world economy of $50 trillion. The amount of ‘subsidy’ that fossil fuels themselves give the rest of world economy is orders of magnitude greater than what governments give fossil fuel companies. (The average cost to produce barrel of oil is $40 – it sells for $100. Subsidy (assuming the $100 billion number is correct – and I have heard numbers as low as $2.5 billion in actual subsidies in the last Presidential debate)). So fossil fuel companies produce ~32 billion barrels of oil per year. Lets assume 1/3 of the $100 billion in subsidies goes towards oil (basically 1/3 of FF consumption is oil) =$33 billion. So we are subsidizing oil companies $1 per barrel. And in turn the oil is subsidizing society 5000x that amount. To speak in terms of a society/government subsidizing oil companies make no sense. Without (cheap) oil, there would be no globalization and living standards would plummet. Some are rooting for that but they are naive.

2) Renewables -all-in- are more expensive than coal/natural gas based electricity and biofuels are way more expensive than liquid fossil fuels. McKibben points to Germany as a shining example of a low-carbon economy – but to combat intermittence and potential shortfalls when the sun isn’t shining they are building 50 new coal plants!! Economic growth cannot continue with or without renewables because fossil fuel extraction costs have been going up 17% a year since 2002. Renewables are fossil fuel extenders, not replacers (at least if a globalized, industrialized, high consumption lifestyle is the model)

3) To call on pension funds, churches and individuals to ‘divest’ from fossil fuel companies shares to ‘hit them where it hurts’ is hopelessly naive. First of all, if pension funds and churches sell all their stock in Exxon and Shell, and people still drive cars, take flights, and eat food based on current shipping/packaging model, then Fossil Fuel companies profits will be just as high and some hedge funds will just buy those shares cheaper and the price goes right back to where it was. If you truly want to get off of fossil fuels you need to REALLY hit them where it hurts, which is to use less -significantly less – this is difficult for most people and impossible for society.

4a) McKibben ignores human nature – to change peoples minds about behavior you have to either make the case really scary, or the time-to-impact really short, because of our evolved tendency to focus on the present (and cultures impact on causing discount rates to be even steeper). For most people, ‘the future’ is this weekend.

4b) Nature abhors a gradient. Those organisms that are most effective in accessing and degrading energy have had evolutionary advantage. This includes human societies. For us to voluntarily give up or reduce access to the highest quality fuels goes against our evolutionary grain for ‘more’ or ‘progress’ is possible (think dictator Tokogawa Japan) but extremely unlikely. Our modern history is one of doing everything in our power to keep continued global access to liquid fuels possible.

Declining energy productivity (lower aggregate EROI), instead of causing a belt tightening in the 1970s, caused us to go to debt to continue high levels of consumption. That led to lower and lower debt productivity (less and less GDP per addl $ of debt), to the point that central banks had to take over the model. In the US, our economy ex-government stopped growing in 2004. China, Russia, Brazil etc are following the exact same model (plummeting debt productivity). So we added government debt to offset declining private growth. Once debt productivity goes below zero (as it is currently in US and probably in many European countries), we are simply transmuting wealth into income – and the timeline of continuing that strategy becomes very short, irrespective of oil prices. Then we went to QE to further support consumption. In past few years central banks have subsidized our consumptive lifestyle to tune of $14 trillion+ http://tinyurl.com/8shtneeWhat is the carbon footprint of QE??). And now new QE is impacting ‘inflation expectations’. (After Qe1, Qe2 and QE3, stocks went up 36%, 24% and 2% while food prices went up 7% 21% and 19% and energy prices went up 30%, 37% and 19%. In effect, what governments are doing now is facilitating an increase in gross energy, while keeping net energy constant (or declining) all the while growing more and more claims of what people THINK they have access to in the future. We are satisfying our evolutionary drive to access more energy but a growing % of ‘money as claim on energy’ is hollow.

5) The 2,795 gigatons that Bill says are ‘available to burn’ do not take into account net energy and the cost in natural resource terms to extract. There are certainly more than the 565 gigatons left that will keep us under 2 degrees C warming – but 2795 will never be extracted. Net and gross important here.

6) By far the largest challenge that the public and politicians will see in the next 12-18 months will be an economic one. Personally, I think 5 years from now the best case (if there are no major disruptions) is a 10-15% drop in global GDP. Worst case is…worse. This trajectory originated from resource/energy constraints but is now largely due to credit constraints. Since 2007 quarterly growth (adjusted for defaults) is 94% correlated with aggregate credit growth. Once credit stops, growth stops – at this stage. Global throughput (measured by real, not nominal GDP) is highly likely to have peaked. As soon as this is recognized, witnessed, attention to climate change (unless the world temps are accelerating dramatically in some sort of methane burp scenario, will be relegated to back burner.

7) If fossil fuel companies are muzzled, and the accompanying economic shock from higher fuel prices hits already fragile global economy, there is a real risk to systemic supply chain breakdowns. One of the largest risks that goes mostly unrecognized on lists like these is globalization and its potential unwind due to liquid fuel shortages or more likely – currency/debt problems. A large part of our living standards are from decades of suppressing import substitution policies and continual offshoring to cheapest location for all sorts of trade goods. The result is a brittle, complex system of micro-components and supply chains – which if it breaks down sharply (as opposed to a gradual move over 10-15 years which would be healthy) creates a bigger risk to the environment/climate/biodiversity than any business as usual trajectory (low odds, but possible). Compared to even 30 years ago, no country is self-sufficient on basic goods, even those who are energy independent. China, Japan, Europe and others are all risks here. (and US and UK).

8) Of the ‘climate activisits/scientists’ I know, and I know 4 people personally who were on IPCC, most have several kids, eat meat, drive cars and take vacations. Their offices where they do the science suggesting limiting CO2 are not energy efficient and there is little to no attempt to reduce consumption. In the end this is what it is all about – we are headed for a lower growth world – the time to ‘choose’ as an option is past – now we will experience it no matter what. We need serious resources (monetary and human) diverted away from low-carbon future towards exploring/preparing for a low consumption future – and they are linked.

CO2 and methane have emerged as the greatest threat to currently evolved large life, but this may take a thousand years to play out, and is now being set irrevocably in motion. But the next 50-100 years will probably see all kinds of frenetic other limits being reached unrelated to heating – and the next 10 years will be about the evaporation of humans abstract claims on future energy/resources (money).

I haven’t finished writing this piece – partially because Bill is a friend of mine and I hold him in high regard. But in the end, he doesn’t aim high enough. I am willing to get arrested or worse for the cause of improving the future/averting environmental disaster – but getting arrested to protest a pipeline that if its not built in USA will still send the CO2 producing fuel to China (except it won’t, because Business As Usual is dead), is too nominal of a goal. Humans like villains – and blaming fossil fuel companies for our woes will probably raise more money/influence than the true villains – our own consumption/addiction. If Bill is right and we need to stop burning fossil fuels altogether before we trigger an environmental apocalypse, then divesting from fossil fuel stocks and bonds is the tiniest of first steps – as we would need to divest from capitalism and democracy in the process.

March 2, 2013 america2point0 forum:

In all the talk about resource limits, overshoot, end of growth, financial collapse etc. I have come to the following conclusion: The psychological response to our predicament – at least in the next 5-10 years, is likely to overwhelm the physical realities

At the same time the 2 primary drivers of growth are waning (energy and credit), we are in the process – as a culture – of losing our primary 2 anchors – religion and belief in capitalism/ more in the future. This will leave behind a gaping hole in peoples attitudes/security/ optimism for future and I fear may be paralyzing to behavior. We are going to have whole demographics sucked down the rabbit hole of anhedonia, apathy, nihilism and hedonism. You can see glimpses of it already. The opportunity exists to find some new cultural carrot to replace the old ones, but that won’t be easy, or quick. But thats where the leverage lies – telling people more and more details about this stuff is toxic. Gotta be a new narrative…

Byron Allen Black replies: If the economy is in a state of collapse and the people feel helpless and bewildered, you invent an enemy and start a war to ‘refresh the narrative’ . In Indonesia, where I live, that would be Soekarno screeching GANYANG MALAYSIA (‘Crush Malaysia’ ) and sending innocent young boys to their deaths in Borneo when Zimbabwe-style hyperinflation set in and citizens were unable to buy rice in Jakarta.

Dec 2, 2011 Nate on money:

1) Money is lent into existence at commercial banks. But the interest that must be paid on the loan is not. in aggregate then there must be growth in order to both service and eventually pay back the loans. Banks have huge balance sheets and only have a few percentage points of real capital against them. Its like me getting a $1 million loan and buying a dump truck, an amusement park, some fixer-up houses, a bowling alley and a 3 month safari to Zambia. I now have zero money left but a bunch of assets, but I am ‘solvent’. If the economy craps out I have spent 100k on a vacation and my 900k of assets are deteriorating in value and productive capacity – the only way to keep afloat is to get more loans and buy more assets. I get more loans and now owe $1.2 million to bank. The bank is ok with that because on paper I can show (mostly) that the amusement park and crappy bowling alley are worth something on paper. The banker closes his eyes because to acknowledge that my stuff is only worth 400-500k on the 1.2 million it has listed on paper means he too shares my loss. Eventually he will say, look I know you can’t pay my 1.2 million but lets just settle for 500k. then I am in big trouble, and so is he. “Me” in this case is representative of much of our banking system.

2) most banks are also brokers. Goldman, Citi, JPMorgan, Morgan Stanley BOfA Merril are all deemed too big to fail.

3) credit unions take less risk so are better places for safe money.

====> But I think counting on any money at all is misplaced confidence. I would think that it is greater than >50% that there will be a monetary reset in next decade and probably sooner. I am not sold on gold and silver as ‘great investments’, but they are better than paper money in an account [my comment: but real cash in a deflation beats gold initially, but you’d better spend the cash on real goods within a few years before the “monetary reset”].

===> One thing I could envision happening in a global jubilee or currency reset is a non-regressive currency reform. Those that have 10,000 in their checking accounts get 10,000 ‘patriot dollars’, those that have 100,000 get 20,000 patriot dollars (80% haircut), those that have 1,000,000 in their accounts get $100,000 (90% haircut) or some such.

As I’ve said before I think it likely that financial assets are going away (they might come back in future). As such to try and focus ones efforts on ‘preserving ones financial wealth’ are probably futile.

====> more money isn’t going to save anyone. more friends and more stuff might.

We ‘can’ grow debt more – it just means that we are kicking the can further down the road. what if we run out of road? Yes – there are all sorts of things that IMF, FED, ECB can do to keep paper economy going for a while longer. central banks have two choices: watch the economy collapse to a state far worse than its pre-QE1 outset, or continue on the path of QE…^n. This will end badly and with consequences not well understood or prepared for. The risks point to a large shrinkage of financial claims (what we think we own on paper), either via increased government involvement squeezing out functioning markets, or by markets abandoning currencies in a terminus of faith in an abstraction. The resulting supply chain disruptions to a world now used to globalized just-in-time inventory input/component replacements are something that will require focused top down response in combination with individuals psychologically preparing for less, potentially significantly less.

The federal reserve is a bank, with capital like any other

They have paid in capital from their member banks IIRC of about 57 billion right now. With this amount of capital they have expanded their balance sheet, of securities they ‘bought’ and in return placed reserves on balance sheets of commercial banks, to almost $3 trillion. The 3 trillion is used for liquidity as the securities the banks offloaded to the fed was illiquid (and underwater). At some point they will need more capital. It’s all a confidence thing. The ECB is even more leveraged.

This money wasn’t really ‘created’ as it wasn’t printed (total amount of printed money in system is around 950 billion (I understand about half of it is in drug cash piles etc).

“Printing” by the FED has become a blogosphere concept and is flat wrong. There are way too many twitterers that don’t really understand what is happening, or what is possible, or bank balance sheets. Under QE1 and QE2 the money sitting in banks asset ledgers cannot be lent out – the only thing it could possibly be used for is to call in actually federal reserve notes -but that didn’t happen – it DID allow banks to get crap off their balance sheets.

There are only 3 things a central bank can do:

They can drive interest rates directly (already down to zero)

They can buy assets and thus drive interest rates down indirectly

They can stabilize markets by providing lending facilities if interbank lending goes sour

The central banks do not control the money supply – that occurs via bank lending.

Keeping rates low is necessary but insufficient criteria for improving the economy.

The Fed is relegated to being ‘wing-man’ to government at this point. The only other possibility is for them to go into retail banking, providing loans directly to John Q Public. they could do that via buying BofA for example.

Ben Bernacke and company are largely done – they’ve done what they can do. IMO there is a vast misconception both by economists and by financial bloggers about how money is really created. The FED doesn’t control our money supply (though they make the rules for member banks). Money comes into existence from the commercial banks, and it is simpler than most imagine.

The creation of money was never an issue when resources were cheap and unlimited. We had a scarcity of money relative to available resources. That inverted starting in the 1970s. Now we have a (large and growing) surplus, as people try to treat money as if it were energy.